Life insurance advice practices will have to implement technological efficiency in their business to manage their revenue streams and continue to thrive under the new Life Insurance Framework (LIF), according to ClearView.
The firm’s managing director, Simon Swanson said the new hybrid commission structure effective 1 January 2018, under which advisers would be paid 80 per cent upfront commissions and 20 per cent ongoing, advice businesses would have to compensate for the loss by becoming more efficient.
“The structure is going to be a given. The key issue is how do you manage the capital which you need to survive until the renewals kick in,” Swanson said.
“So I think a lot of businesses are trying to make themselves far more efficient so that they are not only managing their revenue but also managing their costs through greater use of technology.”
Advice practices and licensees were investing in technology in areas such as customer relationship management (CRM) capabilities, and utilising technology to conduct fact finds, risk profiling and the generation of statements of advice (SOAs).
Advice firms were also seeking to outsource functions like paraplanning to firms who specialised in that and conducted it on a fee-for-service basis.
Swanson also said that while transitioning to the initial hybrid commission rate of 80:20 would reduce margins for life insurers, he said this would be nominal.
“I don’t see it as a big issue. Practices will make up for the loss by being more efficient,” he said.
Swanson added that insurance was a discretionary spend with Australians struggling financially, which was reflected in the fact that business had slowed slightly.
“The cost of giving advice is actually going up and the time to actually run your business is going up which I think is slowing down new business as well,” he said.